Do you know that there are only about two-thirds of small businesses that survive in their first two years?

According to this Fundera article, the first few years of a business are the hardest. But even without these statistics, you experienced this firsthand.

And you’re really lucky if your business survived for more than 5 years, because the longer a company has been in business, the more likely it is to stay.

But if you are doing these common causes of business failure, then you might be endangering your company for an early shutdown.

Grab this guide: What to Do When Your Business Is Failing


1.    You keep marketing to the wrong people.

One of the most common causes of business failure is not closing any deals or sales because you keep marketing to the wrong people.

Say you are selling beer mugs, but you even market to people who are only wine drinkers. Instead of focusing your marketing efforts to people who drink beer, you are wasting your time marketing to people who are not really your target market; hence, you can’t land any sales.

If you’re unable to land sales, there will be no cash flowing into your business which could lead to bankruptcy and closing down.

For you to target your ideal customers effectively, you have to know your audience first. Just as we have discussed in the 42nd episode of our podcast, you need to create a buying persona.

Learn more about buying personas here: Million Dollar Marketing Through Buying Personas with Siva Gounder


2.    You just started a business without a plan.

Failing to plan is planning to fail. You’ve heard this several times but it is actually true.

I know a lot of people who just started a business without really planning anything such as how will they market their product, how to get clients, how to hire people, daily KPIs of their employees, etc. Thus, their business haven’t survived more than a year.

Remember, while everyone just tell you that you have just to take action and do it, it doesn’t mean that you have to start a business without a plan or else you’ll regret it.


3.    You put up a business without having adequate cash reserves.

Lack of funding is also one of the most common causes of business failure. While you have successfully gathered funds to buy equipment and rent an office or place for your biz, it doesn’t mean that you should already start running your biz.

A lot of small business owners start running their biz even if they don’t have a single penny left on them. Not because you launched your product or service, you will instantly pull in money. Not all businesses earn profit on their first week, months or even more than a year.

How will you pay your employees? How will you find money to pay for your operational costs? How will you have money for your personal expenses?

If you don’t have enough cash reserves that will help you get through your first six months or even a year, then you might be forced to shut down your biz.


4.    You hire the wrong people.

Don’t be a cheapskate who keeps on hiring people who are not really qualified for the job. While startups and small businesses have relatively low budget for hiring costs, it will cost you more if you hire the wrong people for the role.

If you are a startup, your first employees matter most because they will be the people who will help you throughout the rocky first two years of your biz. Hiring the wrong people will have several employees coming in and out of your door because they can’t keep up with the role.

It’s okay to hire employees with only little experience due to hiring budget constraints, as long as you train them and support them.


5.    You always complain and resist change.

Business owners who always complain because of the changing trends and rules are often the ones who close their doors early.

For example, you sell traditional magazines, but the trend today is digital magazine subscriptions. If you are too stubborn and refuse to adopt the new trend, you will be left behind by your competitors who accepted the change and adopted the new trend too.


Having your own business is really a dream come true, but running one is a different matter. It’s not all rainbows and butterflies. All businesses experience a rocky start, but if you prevent these common causes of business failure, your business might just be among the lucky percentage that survive.

Specialising is business processes, frameworks and systems, Grant has founded multiple businesses that all operate to target the key fundamental of scalability. His goal is to improve millions of people's lives by assisting business owners to succeed.